The National Pension Commission (PenCom) has introduced a framework for the establishment of Additional Benefits Schemes (ABS) under the Contributory Pension Scheme (CPS). This framework aims to ensure that additional benefits provided by employers to their employees upon retirement are well managed and in compliance with the Pension Reform Act of 2014.
Key Points:
- Purpose of the Framework:
- The framework addresses the provision of additional benefits to employees by their employers upon retirement, as allowed by Section 4 (4) (a) of the Pension Reform Act 2014.
- Regulatory Compliance:
- Sections 54 and 56 of the PRA 2014 mandate that only institutions licensed by the National Pension Commission can manage pension funds and assets. Section 59 establishes penalties for contravention.
- Establishment of ABS:
- Employers have the option to set up ABS to facilitate the payment of additional benefits to their employees upon their exit from employment.
- Management and Custody:
- ABS under the CPS will be managed by licensed Pension Fund Administrators (PFAs), with assets held in custody by licensed Pension Fund Custodians (PFCs), in accordance with the provisions of the PRA 2014 and subject to PenCom’s approval.
- Requirements for Employers:
- Employers seeking to establish an ABS must demonstrate compliance with PRA 2014, including timely remittance of pension contributions, provision of Group Life Insurance coverage for employees, and execution of a portfolio management agreement with chosen PFAs.
- Appointment of PFAs:
- Employers may appoint one or more PFAs to manage their ABS. In cases of multiple PFAs, a lead PFA should be designated, and PenCom should be duly informed.
Conclusion: The introduction of this framework by the National Pension Commission aims to provide clear guidelines for the establishment and management of Additional Benefits Schemes by employers, ensuring that such schemes align with the regulatory framework set forth in the Pension Reform Act of 2014. This framework serves to enhance the retirement benefits provided to employees under the Contributory Pension Scheme.
